The food and beverage industries are no strangers to shifting consumer trends, but the pace of change in recent years has been faster than usual. While dealing with economic pressures, shortages, inflation, and global disruptions, food and beverage companies are being called upon to discern which of the latest trends indicate shifts in buying patterns that will continue to command their attention, and which are passing fads.
The roots of many of today’s trends can be traced to the days of the pandemic when travel restrictions and the shutdown of bars and restaurants severely limited on-premises dining and trade. Often stuck at home and with fewer ways to spend, consumers sought out new food and beverage experiences to provide a distraction from the pandemic.
From a greater focus on wellness and diet to a shift towards broadening palates with premium food and beverages, today’s trends have evolved from what started a few years ago. We are now seeing which themes will endure and warrant our ongoing attention.
A growing commitment to healthy options
Consumers are willing to pay more for healthier food and beverages—a longstanding trend that accelerated as the pandemic took hold. Limited options for discretionary spending gave consumers more disposable income, which many spent on food and beverages that were not just higher in quality and price, but also healthier than their previous choices.
Health and wellness form a key pillar supporting the beverage market’s “premiumization”—paying more for a product that is perceived as unique, higher quality, or more exclusive. As consumers balance healthier lifestyles with keeping alcohol as part of their social life, they’re choosing clean-label, lower-calorie, lighter beverages—products that typically trade at premium and super-premium tiers compared to their traditional counterparts.
We’re seeing a growing demand for emerging brands and alternative, functional beverages, while low-alcohol and alcohol-free beverages are rising sharply in popularity among younger generations: 23% of Gen Z and 24% of Millennials reported choosing these options often, while only 6% of Gen-X and 1% of Boomers say the same.1
Younger consumers prioritize food products that are not just healthy for themselves but healthier for the planet as well. For Gen Z and Millennials, this trend means broadly eco-conscious consumption that emphasizes the sustainability of food production and packaging, along with locally grown and organic products. In fact, consumers in all age categories want companies to address waste, use recyclable packaging, and offer locally sourced products.
The businesses meeting these expectations are often smaller, up-and-coming companies, increasing their appeal as consumers seek to support local, independently-owned businesses. While consumers are generally willing to pay more for the eco-friendly products they prefer, budgetary pressures may force them to make tradeoffs as the economy tightens.
Spring of 2020 saw a sharp increase in premium beer, wine, and spirits sales. Sales of premium, packaged foods and high-quality proteins also surged. This premiumization of food and beverages contributed to greater demand for more exclusive brands and product upgrades as consumers reached for consumable pleasures that were not just high-quality but also healthier and more exotic.
Some premium-priced beverage categories, however, are showing resilience in their segments despite inflation. While overall wine consumption and sales have declined the past two years, sales of 750 ml wines priced $15 or more have increased over the same period, and since 2018, wine prices have grown over 20% across the board. Tequila offers another example of premiumization as consumers reach for higher-end products. Drizly reports that tequila has surpassed whiskey, commanding an average of $48.60 per unit, with whiskey at $37.78.2
Across a wide range of food and beverage products, we’ve seen customers favor premium products, even if that means buying smaller amounts. As inflation has ratcheted prices, companies have maintained revenue by selling fewer units of higher-priced products.
It’s hard to predict whether this trend will continue if inflation lingers or the economy softens. Because inflation has less of an impact on the buying behavior of affluent customers, premiumization has more staying power at the top end. We’re just beginning to see evidence of middle-income consumers, who are harder hit by inflation, compromising quality to make their dollars go farther.
The quest for unique flavors and experiences
Consumers are favoring unique experiences over product purchases, whether that means going out to dinner, visiting a bar, or entertaining at home with a premium beverage. Food trucks are an alternative to traditional, fast-food restaurants and continue to be a strong food-service growth segment. Checking out a new type of cuisine from a food truck provides the experiential angle consumers seek and offers a fast, cheap option for cost-conscious diners.
Along with novel experiences, consumers are trying different cuisines and beverages and broadening their taste palates. Demand for more diverse and exotic flavors continues to grow—Asian food is the top search for online recipes, followed by Latin foods. Younger consumers are driving this trend as they seek out new foods and share their discoveries on social media. The same trend is driving the growth of pre-packaged, prepared options that reflect greater interest in unfamiliar flavors and casual street foods.
We see a similar interest in novelty reflected in consumers’ alcoholic beverage choices, and they dive deeper when their taste and curiosity are piqued. We’ve seen large, domestic brands introduce non-alcoholic beverages like teas and mocktails, and craft spirits have expanded in response to consumer interest and demand. Ready-to-drink cocktails remain in growth mode, increasing 18% over the last 12 months—a pattern we’ve seen in many different beverage categories.3
How ready is your business?
As these trends continue to evolve, food and beverage companies are developing new products to meet the changing preferences and demands of their customers. When assessing whether your business is ready to take advantage of these opportunities, consider:
- Alignment – Are your organization’s leaders, marketers, product developers, and financial planners attuned to shifts in the industry? Do they see the latest trends? Can your business align with these changes? Are you taking action to move in this new direction?
- Scalability – Are you poised for growth? Do you have the production and distribution needed to drive profitability as a regional player or meet the needs of major retailers—like Costco or Walmart—for national distribution? What investments will you need to make?
- Flexibility – Does your business adapt well to change? Can you shed weaker products and move to more attractive segments quickly enough to gain an edge on the competition?